Oil Prices Pare Losses. Mimicking Dollar's Move

By Timothy Puko And Biman Mukherji 

        Oil prices are slumping to multi-month lows again Friday, but have pared losses as they mimic a topsy-turvy trading for the dollar.
        Light, sweet crude for September delivery recently fell 1.5%, $47.79 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 0.9%, to $52.82 a barrel on ICE Futures Europe. Both had briefly rebounded all the way to small gains Friday before resuming their retreat.
        The oil markets have been sinking because of a worldwide glut, but they have also been heavily influenced by the dollar for months, frequently making short-term moves in the opposite direction. Oil is priced in dollars and it becomes more expensive for holders of other currencies as the greenback appreciates.
        The dollar slid against the euro Friday after a quarterly measure of U.S. labor costs indicated stagnating wages, casting some doubt on the Federal Reserve's plans to raise rates in the coming months. The Wall Street Journal's dollar index has jumped sharply to a four-month high in recent sessions, which helped push oil lower to start Friday's trading.
        "The dollar effect is usually very short and unlikely to cause a trend downward," said Daniel Ang, an investment analyst at Phillip Futures. "Prices are unlikely to fall much further."
        The longer-term push in oil has been the flood of oil hitting the global markets and growing concerns that China, one of the world's largest consumers, won't help absorb it. Trading earlier this week pushed U.S. oil to a four-month low and Brent to a six-month low
        The added losses on Friday have put U.S. crude down nearly 20% in July, and Brent down nearly 17%.
        High international supplies have kept prices under pressure and increased competition among producers, who are taking cost-cutting measures. But few have ventured to cut production.
        Comments by Abdalla Salem el-Badri, secretary general of the Organization of the Petroleum Exporting Countries, on Thursday have done little to reassure the market that the oil glut will be tackled any time soon. Mr. el-Badri was in Moscow for talks with Russia's energy minister, Alexander Novak.
        "OPEC shows absolutely no sign of blinking," said David Hufton, of PVM Oil Associates in London. The secretary general believes an increase in oil demand will support prices, and will absorb any additional oil exports from Iran, said Hufton. "Unfortunately for OPEC the data, such as it is, does not support this view."
        The world will be entering 2016 with a record high level of global stocks, and average surplus is expected to be around 1.5 million barrels a day, he said.
        Gasoline futures recently rose 1% to $1.8452 a gallon. Diesel futures fell 0.3% to $1.5931 a gallon.
        Matthew Cowley and James Ramage contributed to this article.
        Write to Timothy Puko at tim.puko@wsj.com and Biman Mukherji at biman.mukherji@wsj.com
        (END) Dow Jones Newswires

        July 31, 2015 10:45 ET (14:45 GMT)

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